SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to [S] 240.14a-12
JACK HENRY & ASSOCIATES, INC.
-----------------------------------------------
(Name of Registrant as Specified in its Charter)
------------------------------------------------------------------------
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computed pursuant to Exchange Act Rule 0-11 (set forth the
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[ ] Fee paid previously with preliminary materials.
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JACK HENRY & ASSOCIATES, INC.
663 Highway 60, P.O. Box 807
Monett, Missouri 65708
NOTICE OF 2006 ANNUAL MEETING OF STOCKHOLDERS
TO THE STOCKHOLDERS OF JACK HENRY & ASSOCIATES, INC.:
PLEASE TAKE NOTICE that the 2006 Annual Meeting of Stockholders of Jack
Henry & Associates, Inc., a Delaware corporation, will be held in the
Company's Executive Conference Center, lower level (Building J-7) at the
company headquarters, 663 Highway 60, Monett, Missouri, on Tuesday, October
31, 2006, 11:00 a.m., local time, for the following purposes:
(1) To elect seven (7) directors to serve until the 2007 Annual Meeting of
Stockholders;
(2) To approve the Company's 2006 Employee Stock Purchase Plan: and
(3) To transact such other business as may properly come before the Annual
Meeting and any adjournments thereof.
The close of business on September 22, 2006, has been fixed as the record
date for the Annual Meeting. Only stockholders of record as of that date
will be entitled to notice of and to vote at said meeting and any
adjournment or postponement thereof.
The accompanying form of Proxy is solicited by the Board of Directors of the
Company. The attached Proxy Statement contains further information with
respect to the business to be transacted at the Annual Meeting.
ALL STOCKHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR NOT
YOU EXPECT TO ATTEND, PLEASE DATE AND SIGN THE ENCLOSED PROXY. IF YOU DECIDE
TO ATTEND THE MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE YOUR SHARES IN
PERSON.
By Order of the Board of Directors
Janet E. Gray
Secretary
Monett, Missouri
September 29, 2006
TABLE OF CONTENTS
Voting................................................. 1
Stock Ownership of Certain Stockholders................ 2
Election of Directors (Proposal 1)..................... 4
Corporate Governance................................... 5
Audit Committee Report................................. 8
Executive Officers and Significant Employees........... 9
Certain Relationships and Related Transactions......... 10
Section 16(a) Beneficial Ownership Reporting Compliance 10
Executive Compensation................................. 10
Equity Compensation Plan Information................... 12
Compensation Committee Report.......................... 13
Company Performance.................................... 15
Approval of the Company's 2006 Employee Stock Purchase
Plan (Proposal 2).................................... 15
Independent Registered Public Accounting Firm.......... 18
Stockholder Proposals.................................. 19
Cost of Solicitation and Proxies....................... 19
Financial Statements................................... 20
Other Matters.......................................... 20
Exhibit A - Audit Committee Charter................ 20
Exhibit B - Jack Henry & Associates, Inc.
2006 Employee Stock Purchase Plan................ 25
JACK HENRY & ASSOCIATES, INC.
663 Highway 60, P.O. Box 807
Monett, Missouri 65708
PROXY STATEMENT
FOR THE 2006 ANNUAL MEETING OF STOCKHOLDERS
To Be Held Tuesday, October 31, 2006
This Proxy Statement and the enclosed proxy card (the Proxy) are furnished
to the stockholders of Jack Henry & Associates, Inc., a Delaware corporation
(the Company), in connection with the solicitation of Proxies by the
Company's Board of Directors for use at the 2006 Annual Meeting of
Stockholders, and any adjournment or postponement thereof (the Annual
Meeting), to be held in the Company's Executive Conference Center, lower
level (Building J-7) at the company headquarters, 663 Highway 60, Monett,
Missouri, at 11:00 a.m., local time, on Tuesday, October 31, 2006. The
mailing of this Proxy Statement, the Proxy, the Notice of Annual Meeting and
the accompanying 2006 Annual Report to Stockholders is expected to commence
on or about September 29, 2006.
The Board of Directors does not intend to bring any matters before the
Annual Meeting except those indicated in the Notice and does not know of any
matter which anyone else proposes to present for action at the Annual
Meeting. If any other matters properly come before the Annual Meeting,
however, the persons named in the accompanying form of Proxy, or their duly
constituted substitutes, acting at the Annual Meeting, will be deemed
authorized to vote or otherwise to act thereon in accordance with their
judgment on such matters.
If the enclosed Proxy is properly executed and returned prior to voting at
the Annual Meeting, the shares represented thereby will be voted in
accordance with the instructions marked thereon. Each proposal, including
the election of directors, will require the affirmative vote of a majority
of the shares of common stock voting in person or by Proxy at the Annual
Meeting.
Any stockholder executing a Proxy retains the power to revoke it at any time
prior to the voting of the Proxy. It may be revoked by a stockholder
personally appearing at the Annual Meeting and casting a contrary vote, by
filing an instrument of revocation with the Secretary of the Company, or by
the presentation at the Annual Meeting of a duly executed later dated Proxy.
VOTING
At the 2006 Annual Meeting, Stockholders will consider and vote upon:
(1) The election of seven (7) directors
(2) Approval of the Company's 2006 Employee Stock Purchase Plan; and
(3) Such other matters as may properly come before the Annual Meeting.
Only stockholders of record at the close of business on September 22, 2006,
the record date for the Annual Meeting, are entitled to notice of and to
vote at such meeting.
The Company's authorized capital stock currently consists of 250,000,000
shares of common stock, par value $.01 per share (the Common Stock), and
500,000 shares of preferred stock, par value $1.00 per share (the Preferred
Stock). As of August 18, 2006, there were 91,219,608 shares of Common Stock
outstanding and no shares of Preferred Stock outstanding. At such date, our
executive officers and directors were entitled to vote, or to direct the
voting of 11,113,037 shares of Common Stock, representing 12% of the shares
entitled to vote at the 2006 Annual Meeting. Unless otherwise specified,
all share numbers and other share data have been adjusted to reflect all
prior stock splits.
All shares represented by Proxy and all Proxies solicited hereunder will be
voted in accordance with the specifications made by the stockholders
executing such Proxies. If a stockholder does not specify how a Proxy is to
be voted, the shares represented thereby will be voted: (1) FOR the election
as directors of the seven (7) persons nominated by the Board of Directors;
and (2) FOR the approval of the Company's 2006 Employee Stock Purchase Plan;
and (3) upon other matters that may properly come before the Annual Meeting,
in accordance with the discretion of the persons to whom the Proxy is
granted.
Each share of our Common Stock outstanding on the record date will be
entitled to one vote on each matter. The seven (7) nominees for election as
directors who receive the most votes "for" election will be elected.
Approval of the Company's 2006 Employee Stock Purchase Plan will require an
affirmative vote of the majority of the shares of Common Stock present or
represented at the annual meeting.
For the election of directors, withheld votes do not affect whether a
nominee has received sufficient votes to be elected. For the purpose of
determining whether the stockholders have approved matters other than the
election of directors, abstentions are treated as shares present or
represented and voting, so abstaining has the same effect as a negative
vote. Shares held by brokers that do not have discretionary authority to
vote on a particular matter and that have not received voting instructions
from their customers are not counted or deemed to be present or represented
for the purpose of determining whether stockholders have approved that
matter, but they are counted as present for the purpose of determining the
existence of a quorum at the annual meeting. Please note that banks and
brokers that have not received voting instructions from their clients cannot
vote on their clients' behalf on "non-routine" proposals, such as approval
of the Company's 2006 Employee Stock Purchase Plan, but may vote their
clients' shares on the election of directors.
STOCK OWNERSHIP OF CERTAIN STOCKHOLDERS
The following table sets forth information as of August 18, 2006, concerning
the equity ownership of (a) those individuals who are known to be the
beneficial owners, as defined in Rule 13d-3 of the Securities Exchange Act
of 1934, of 5% or more of the Company's Common Stock, (b) the directors, (c)
the executive officers named in the Summary Compensation Table and (d) all
of our directors and executive officers as a group:
Number of Shares Percentage of Shares
Title of Class Beneficial Owner Beneficially Owned (1) Outstanding (1)
-------------- ------------------- ---------------------- ---------------
$.01 par value T. Rowe Price 12,500,850 13.7%
Common Stock Associates, Inc (2)
100 E Pratt St
Baltimore, MD
Michael E. Henry, 6,959,865 7.6%
Vicki Jo Henry (3)
and JKHY Partners
663 Highway 60
Monett, MO
Kayne Anderson 6,178,725 6.8%
Rudnick Investment (4)
Management, LLC
1800 Ave of the
Stars, 2nd Flr
Los Angeles, CA
Jerry D. Hall 2,434,158 2.7%
(5)
John W. Henry 1,004,727 1.1%
Tony L. Wormington 657,570 *
(6)
James J. Ellis 490,000 *
(7)
John F. Prim 392,219 *
(8)
Kevin D. Williams 204,573 *
(9)
Marguerite P.
Butterworth 116,413 *
Craig R. Curry 75,088 *
(10)
Mark S. Forbis 53,748 *
(11)
Wesley A. Brown 48,000 *
Joseph J. Maliekel 28,135 *
(12)
All directors and 12,464,496 13.7%
executive officers as (13)
a group (12 persons)
* Less than 1%
(1) Information is set forth as of August 18, 2006. The persons named in
the table have sole voting and investment power with respect to all
shares of Common Stock shown as beneficially owned by them, except as
noted below. With respect to shares held in the Company's 401(k) Plan
(the "Retirement Plan"), a participant has the right to direct the
disposition of shares allocated to his account.
(2) According to a Schedule 13G filed February 14, 2006, T. Rowe Price
Associates, Inc. has sole voting power with respect to 2,129,500 shares
and sole dispositive power with respect to 12,500,850 shares.
(3) Reflects information in filings with the SEC by Michael E. Henry, his
sister Vicki Jo Henry and JHKY Partners, their family partnership.
Michael E. Henry separately may be deemed to beneficially own 6,959,865
shares, including 213,347 shares held in the Michael E. Henry Annuity
Trust, 2,218 shares allocated to his Retirement Plan account, 400,000
shares currently acquirable by exercise of outstanding stock options,
3,190,200 shares held by JKHY Partners, 2,554,100 shares held in a
living trust and 600,000 shares held by the Henry Family Limited
Partnership, both established by his mother, Eddina F. Mackey. Michael
E. Henry may be deemed to share beneficial ownership in the shares held
by JKHY Partners, by the Eddina F. Mackey Trust and by the Henry Family
Limited Partnership because he has been granted proxies to vote such
shares. Vicki Jo Henry does not beneficially own any shares of common
stock in her individual capacity and her business address is 6851 South
Holly Circle, Suite 270, Englewood, Colorado, 80112. The business
address of Michael E. Henry and JKHY Partners is reflected in the
table.
(4) According to a Schedule 13G filed February 2, 2006, Kayne Anderson
Rudnick Investment Management, LLC has sole voting and dispositive
power with respect to these shares.
(5) Includes 193,866 shares beneficially owned by his wife.
(6) Includes 130,000 shares that are currently acquirable by exercise of
outstanding stock options and 33,575 shares held in the Retirement Plan
for Mr. Wormington's account.
(7) Includes 190,000 shares that are currently acquirable by exercise of
outstanding stock options.
(8) Includes 350,000 shares that are currently acquirable by exercise of
outstanding stock options and 14,996 shares held in the Retirement Plan
for Mr. Prim's account.
(9) Includes 190,000 shares that are currently acquirable by exercise of
outstanding stock options and 7,408 shares held in the Retirement Plan
for Mr. Williams' account.
(10) Includes 13,334 shares that are currently acquirable by exercise of
outstanding stock options, 53,758 shares beneficially owned by his
minor children and 7,996 shares held in trust for a family member for
which Mr. Curry serves as trustee.
(11) Includes 50,000 shares that are currently acquirable by exercise of
outstanding stock options and 2,798 shares held in the Retirement Plan
for Mr. Forbis' account.
(12) Includes 28,125 shares that are currently acquirable by exercise of
outstanding stock options.
(13) Includes 1,351,459 shares that are currently acquirable under
outstanding stock options, and 60,995 shares held in the Retirement
Plan for the accounts of the executive officers.
PROPOSAL 1
ELECTION OF DIRECTORS
Procedure
At the meeting, the stockholders will elect seven (7) directors to hold
office for one-year terms ending at the 2007 Annual Meeting of Stockholders
or until their successors are elected and qualified. The Board of Directors
has nominated the Company's seven (7) current directors for reelection at
the Annual Meeting.
The stockholders are entitled to one vote per share on each matter submitted
to vote at any meeting of the Stockholders. Unless contrary instructions are
given, the persons named in the enclosed Proxy or their substitutes will
vote "FOR" the election of the nominees named below.
Each of the nominees has consented to serve as director. However, if any
nominee at the time of election is unable to serve or is otherwise
unavailable for election, and as a result other nominees are designated by
the Board of Directors, the persons named in the enclosed Proxy or their
substitutes intend to vote for the election of such designated nominees.
Nominees For Election
The directors and nominees for election as directors of the Company, as well
as certain information about them, are as follows:
Name Position with Company Director Since
---- --------------------- --------------
Michael E. Henry Chairman and Director 1986
John W. Henry Vice Chairman, Senior Vice 1977
President and Director
Jerry D. Hall Executive Vice President and 1977
Director
James J. Ellis Director 1985
Joseph J. Maliekel Director 2002
Craig R. Curry Director 2004
Wesley A. Brown Director 2005
The following information relating to the Company's directors and nominees
for director, all of whom are United States citizens, is with respect to
their principal occupations and positions during the past five years:
Michael E. Henry, age 45, Chairman of the Board and Director. Mr. Henry, the
son of John W. Henry and a director of the Company since 1986, has served as
Chairman of the Board since 1994 and Chief Executive Officer from 1994 to
June 2004. He previously served as Vice Chairman and Senior Vice President
from 1993 to 1994. He served as Manager of Research and Development from
1983 to 1993. He joined the Company in 1979.
John W. Henry, age 71, Vice Chairman, Senior Vice President and Director.
Mr. Henry, a co-founder and principal stockholder of the Company, has served
as Vice Chairman since 1994. He previously served as Chairman of the Board
from 1977 through 1994. He also has been a director since the Company's
incorporation in 1977. He previously served as Chief Executive Officer from
1977 through 1988 and as President until 1989.
Jerry D. Hall, age 63, Executive Vice President and Director. Mr. Hall, a
co-founder and principal stockholder of the Company, has served as Executive
Vice President since 1994. He previously served as Chief Executive Officer
from 1990 through 1994. He also has been a director since the Company's
incorporation in 1977. He previously served as President from 1989 through
1993 and as Vice President-Operations from 1977 through 1988.
James J. Ellis, age 72, Director. Mr. Ellis, a director of the Company since
1985, has been Managing Partner of Ellis/Rosier Financial Services since
1992. Mr. Ellis served as general manager of MONY Financial Services,
Dallas, Texas, from 1979 until his retirement in 1992. Mr. Ellis also serves
as a director of Merit Medical Systems, Inc.
Joseph J. Maliekel, age 45, Director. Mr. Maliekel became a director of the
Company in December 2002. He is currently employed as a partner in the
public accounting firm BDO Seidman, LLP. From 1999 through August 2006, Mr.
Maliekel was employed in various accounting and audit positions with the
Monsanto Company, most recently as Director of External Reporting. Prior to
joining Monsanto, Mr. Maliekel was a Senior Manager with Deloitte & Touche
LLP, where he was employed from 1986 to 1999. Mr. Maliekel is a Certified
Public Accountant.
Craig R. Curry, age 45, Director. Mr. Curry, a director of the Company since
March 2004, is Chairman and CEO of Central Bank, Lebanon, Missouri, with
which he has been affiliated since 1983.
Wesley A. Brown, age 52, Director. Mr. Brown, a director of the Company
since his appointment in August 2005, is Managing Director and President of
St. Charles Capital, LLC in Denver, Colorado. Prior to founding St. Charles
Capital, Mr. Brown served as Managing Director of McDonald Investments, Inc.
(2001-2004) and as Executive Vice President of the Wallach Company, Inc.
(1991-2000).
CORPORATE GOVERNANCE
The Company and its businesses are managed under the direction of the Board
of Directors. The Board generally meets a minimum of four times during the
year, but has complete access to management throughout the year.
Corporate Governance Guidelines
The Board of Directors has adopted Corporate Governance Guidelines which
address the following subjects:
- The majority of the Board should be independent under relevant
Nasdaq standards
- Independent directors should not be compensated by the Company other
than in the form of Director's fees (including director's
compensatory stock options)
- Membership on the Audit, Compensation and Governance Committees
should be limited to independent directors
- The Board should conduct an annual self-evaluation to determine
whether it and its committees are functioning properly
- Non-management directors may meet in executive session from time to
time without members of management
- The Chief Executive Officer shall provide an annual report to the
Board on succession planning
- The Governance Committee is responsible for determining skills and
characteristics of Board candidates, and should consider factors
such as independence, experience, strength of character, judgment,
technical skills, diversity and age
- The Board and its committees shall have the right at any time to
retain independent counsel
- Board members should not sit on more than 3 other boards
- Board members are expected to attend all Annual Meetings of the
Stockholders
- Stockholders may communicate with the Board by submitting written
comments to the Secretary for the Company, who will screen out
inappropriate communications and forward same to the directors
Nomination Policy
The Board of Directors has also adopted a Nomination Policy with respect to
the consideration of director candidates recommended by stockholders. A
candidate submission from a stockholder will be considered at any time if
the following information is submitted to the Secretary of the Company:
- The recommending stockholder's name and address, together with the
number of shares, length of period held and proof of ownership
- Name, age and address of candidate
- Detailed resume of candidate, including education, occupation,
employment and commitments
- Description of arrangements or understandings between the
recommending stockholder and the candidate
- Statement describing the candidate's reasons for seeking election to
the Board and documenting candidate's satisfaction of qualifications
described in the Corporate Governance Guidelines
- A signed statement from the candidate, confirming willingness to
serve
- If the recommending stockholder has been a beneficial holder of more
than 5% of the Company's stock for more than a year, then it must
consent to additional public disclosures by the Company with regard
to the nomination
The Secretary of the Company will promptly forward complying nomination
submissions to the Chairman of the Governance Committee. The Governance
Committee may consider nominees submitted from a variety of sources
including but not limited to stockholder nominations. If a vacancy arises
or the Board decides to expand its membership, the Committee will evaluate
potential candidates from all sources and will rank them by order of
preference if more than one is identified as properly qualified. A
recommendation will be made to the Board by the Governance Committee based
upon qualifications, interviews, background checks and the Company's needs.
Code of Conduct
The members of the Board of Directors, as well as the executive officers and
all other employees, are subject to and responsible for compliance with the
Jack Henry Code of Conduct. The Code of Conduct contains policies and
practices for the ethical and lawful conduct of our business, as well as
procedures for confidential investigation of complaints and discipline of
wrongdoers.
Governance Materials Available
The Company has posted its significant corporate governance documents on its
website at www.jackhenry.com/ir.corpinfo/. There you will find copies of
the current Corporate Governance Guidelines, the Jack Henry Code of Conduct,
the Compensation Committee Charter, the Governance Committee Charter (with
attached Nomination Policy) and Audit Committee Charter, as well as
the Company's Certificate of Incorporation and By-Laws. Other investor
relations materials are also posted at www.jackhenry.com/ir, including SEC
reports, financial statements and news releases.
The Board of Directors And Its Committees
The Board of Directors held four meetings during the last fiscal year. The
Board has determined that four of its seven members, Messrs. Ellis,
Maliekel, Curry, and Brown are independent directors under applicable Nasdaq
standards. The Board maintains an Audit Committee of which Messrs. Ellis,
Maliekel, Brown and Curry are members. The Board has determined that Joseph
Maliekel is an audit committee financial expert and that he is independent
as that term is used in Item 7(d)(3)(iv) of Schedule 14A under the
Securities Exchange Act of 1934. The Board also maintains a Compensation
Committee and a Governance Committee with Messrs. Ellis, Maliekel and Curry
as members of each committee. All members of the Audit, Compensation and
Governance Committees are independent directors. Each director attended at
least 75% of all meetings of the Board of Directors and all committees on
which they served. The independent directors met in one Executive Session
without management present during the last fiscal year.
The Compensation Committee establishes and reviews the compensation and
benefits of the Executive Officers, evaluates the performance of senior
executive officers, considers incentive compensation plans for our employees
and carries out duties assigned to the Committee under our equity
compensation plans and employee stock purchase plan. The Compensation
Committee operates under a written charter adopted by the Board.
The Governance Committee identifies, evaluates and recruits qualified
individuals to stand for election to the Board of Directors, recommends
corporate governance policy changes and evaluates Board performance. The
Governance Committee also operates under a charter adopted by the Board.
The Governance Committee will consider nominees recommended by stockholders,
provided such recommendations are made in accordance with the procedures set
forth in the "Governance Committee Nomination Policy" attached to its
charter, discussed in greater detail in "Corporate Governance," above.
The Audit Committee selects and retains the independent registered public
accounting firm, reviews the scope and results of the audit with the
independent registered public accounting firm and management, reviews
critical accounting policies and practices, reviews and evaluates our audit
and control functions, reviews and pre-approves retention of the independent
registered public accounting firm for any audit, audit related and non-audit
services, reviews and approves all material related party transactions, and
regularly reviews regulatory compliance matters, including our outsourcing
services and business recovery operations. The Audit Committee operates
under a written Audit Committee Charter.
The Audit Committee met eight times, the Compensation Committee met once and
the Governance Committee met once during the last fiscal year.
Directors Compensation
The directors who are employed by the Company do not receive any separate
compensation for service on the Board of Directors. Each non-employee
director receives annual compensation of $25,000 per year plus $2,500 for
attending each Board of Directors meeting. Audit Committee members receive
$1,500 for each in-person Audit Committee meeting and $1,000 for each
telephone Audit Committee meeting attended. Governance and Compensation
Committee members receive $600 for each in-person Committee meeting
attended. To compensate for additional time spent on Committee maters, the
chairmen of the Audit, Compensation and Governance Committees receive a
premium of 50% of the standard attendance fee for each Committee meeting
that they chair. Each non-employee director is also reimbursed for out-of-
pocket expenses incurred in attending all Board and committee meetings.
Under the 2005 Non-Qualified Stock Option Plan each non-employee director is
compensated by the annual grant of non-statutory stock options to purchase
10,000 shares of Common Stock, subject to an overall grant limitation under
the plan of 100,000 shares to each individual director.
AUDIT COMMITTEE REPORT
The Audit Committee of the Company's Board of Directors is currently
composed of four independent directors. The Board has determined that Audit
Committee member Joseph J. Maliekel is a financial expert under relevant SEC
standards because of his extensive accounting and auditing experience. The
Board of Directors and the Audit Committee believe that the Audit
Committee's current member composition satisfies the rules of the National
Association of Securities Dealers, Inc. (the "NASD") that govern audit
committee composition, including the requirement that audit committee
members all be "independent directors" as that term is defined by NASD Rule
4200(a)(15).
The Audit Committee operates under a written charter adopted by the Board of
Directors, a copy of which is attached to this Proxy statement as Exhibit A.
The Charter requires the Audit Committee to oversee and retain the
independent registered public accounting firm, pre-approve the services and
fees of the independent registered public accounting firm, regularly
consider critical accounting policies of the Company, review and approve
material related party transactions, receive reports from the Company's
Compliance Officer, and establish procedures for receipt and handling of
complaints and anonymous submissions regarding accounting or auditing
matters. The charter also contains the commitment of the Board of Directors
to provide funding and support for the operation of the Audit Committee,
including funding for independent counsel for the Committee if the need
arises.
The role of the Audit Committee is to assist the Board of Directors in its
oversight of the Company's financial reporting process. Management has the
primary duty for the financial statements and the reporting process,
including the systems of internal controls. The independent registered
public accounting firm is responsible for auditing the Company's financial
statements and expressing an opinion as to their conformity to accounting
principles generally accepted in the United States.
In the performance of its oversight function, the Audit Committee has
reviewed and discussed with management and the independent registered public
accounting firm the Company's audited financial statements. The Audit
Committee also has discussed with the independent registered public
accounting firm the matters required to be discussed by Statement on
Auditing Standards No. 61 relating to communication with audit committees.
In addition, the Audit Committee has received from the independent
registered public accounting firm the written disclosures and letter
required by Independence Standards Board Standard No. 1 relating to
independence discussions with audit committees, has discussed with the
independent registered public accounting firm their independence from the
Company and its management, and has considered whether the independent
registered public accounting firm's provision of non-audit services to the
Company is compatible with maintaining the firm's independence.
The Audit Committee discussed with the Company's independent registered
public accounting firm the overall scope and plans for their respective
audits. The Audit Committee meets with the internal auditors and the
independent registered public accounting firm, with and without management
present, to discuss the results of their examinations, their evaluations of
the Company's internal controls and the overall quality of the Company's
financial reporting. These meetings without management present are held at
least once each year, and were held twice in the fiscal year just ended.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors, and the Board has approved,
that the Company's audited financial statements be included in the Company's
2006 Annual Report to Shareholders and Annual Report on Form 10-K for the
year ended June 30, 2006 for filing with the Securities and Exchange
Commission.
James J. Ellis, Joseph J. Maliekel, Craig R. Curry and Wesley A. Brown
Members of the Audit Committee
EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The executive officers and significant employees of the Company, as well as
certain biographical information about them, are as follows:
Officer/Significant
Name Position with Company Employee Since
------------------------- ------------------------- --------------
Michael E. Henry Chairman of the Board 1983
John F. Prim Chief Executive Officer 2001
Tony L. Wormington President 1998
John W. Henry Vice Chairman and Senior 1977
Vice President
Jerry D. Hall Executive Vice President 1977
Kevin D. Williams Chief Financial Officer 2001
and Treasurer
Mark S. Forbis Vice President 2006
The following information is provided regarding the executive officers and
significant employees not already described herein, all of whom are United
States citizens:
John F. Prim, age 51, Chief Executive Officer. Mr. Prim has served as Chief
Executive Officer since July 1, 2004. He served as President from January
2003 to July 2004 and as Chief Operating Officer from July 2001 to January
2003. Mr. Prim joined the Company in 1995 as part of the acquisition of the
Liberty division of Broadway & Seymour, Inc. He previously served as
General Manager of the E-Services Division from July 2000 to June 2001 and
as General Manager of the OutLink Services Division from 1995 to 2000.
Tony L. Wormington, age 44, President. Mr. Wormington has served as
President since July 1, 2004. He previously served as Chief Operating
Officer from January 2003 to June 2004 and as a Vice President from 1998 to
2002. Mr. Wormington joined the Company in 1980 and served as Research and
Development Manager from 1993 to December 2002.
Kevin D. Williams, age 47, Chief Financial Officer and Treasurer. In
January 2001, Mr. Williams was appointed by the Board of Directors to serve
as Chief Financial Officer and Treasurer of the Company. He previously
served as Controller of the Company since joining the Company in 1998.
Mark S. Forbis, age 43, Vice President and Chief Technology Officer. Mr.
Forbis has served as Chief Technology Officer since May 5, 2006 and as
General Manager of Technology Services since December of 2002. Mr. Forbis
joined the Company in 1988 and has served in a number of positions,
including Manager of Imaging from 1994 to his appointment as a General
Manager in 2002.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Director Craig R. Curry is Chairman and CEO of Central Bank, Lebanon,
Missouri. Mr. Curry and his family own a substantial portion of the equity
interests in Central Bank. Central Bank is a customer of the Company and
during the year ended June 30, 2006, it paid $235,166.98 to the Company for
software licenses and software maintenance services.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company is required to identify any director, officer or greater than
ten percent beneficial owner who failed to timely file with the Securities
and Exchange Commission a report required under Section 16(a) of the
Securities Exchange Act of 1934 relating to ownership and changes in
ownership of the Company's common stock. The required reports consist of
initial statements on Form 3, statements of changes on Form 4 and annual
statements on Form 5.
To the Company's knowledge, based solely on its review of the copies of such
forms received by it, the Company believes that during the fiscal year ended
June 30, 2006, all required Section 16(a) filings were filed timely except
for one Form 4 reporting a single transaction that was filed late for
Director James J. Ellis due to a clerical error.
EXECUTIVE COMPENSATION
The following table sets forth certain information with regard to the
compensation paid to the Chief Executive Officer, the Company's other four
most highly compensated current executive officers and one retired executive
officer for the three years ended June 30, 2006.
Summary Compensation Table
Annual Compensation Long-Term Compensation
--------------------------- ----------------------
Shares Restricted
Underlying Stock All Other
Options Awards Compensation
Name and Principal Position Year Salary Bonus (1) (2) (3) (4)
--------------------------- ---- -------- -------- ------- ------ ------------
John F. Prim 2006 $ 450,000 $ 800 - - $ 5,000
Chief Executive Officer 2005 450,000 800 - - 5,000
2004 340,000 800 - - 5,000
Tony L. Wormington 2006 400,000 800 - - 5,000
President 2005 400,000 800 - - 5,000
2004 291,667 800 - - 5,000
Kevin D. Williams 2006 350,000 800 - - 5,000
Treasurer and 2005 350,000 800 - - 5,000
Chief Financial Officer 2004 203,333 800 - - 5,000
Mark S. Forbis 2006 200,000 800 - - 5,000
Vice President and 2005 163,750 800 - - 5,000
Chief Technology Officer 2004 149,167 800 - - 5,000
Marguerite P. Butterworth (5) 2006 146,000 50,800 - - 5,000
Vice President 2005 139,333 800 - - 5,000
2004 131,167 800 - - 5,000
Jerry D. Hall 2006 102,400 800 - - 5,000
Executive Vice President 2005 102,400 800 - - 4,733
2004 102,400 800 - - 5,000
(1) Reflects Holiday Bonus of $800 paid to all full-time employees of the
Company in each of the three most recent fiscal years. In regards to
Messrs. Prim, Wormington, Williams, and Mrs. Butterworth, these Holiday
Bonuses were erroneously not reported in fiscal year 2005, and were
reported as part of salary in 2004. As to Mr. Hall, the Holiday Bonus
was previously reported as part of salary in both fiscal years 2005 and
2004.
(2) Options were not granted to any of the executive officers during the
2004, 2005, and 2006 fiscal years.
(3) The Company's 2005 Restricted Stock Plan was approved by the
stockholders at the Annual Meeting held on November 1, 2005. No
awards of restricted stock were made to any of the executive officers
during the fiscal year ended June 30, 2006.
(4) Corporate 401(k) matching contribution for each executive officer in
each period. These amounts have been reported as bonus in prior years.
(5) Ms. Butterworth retired on June 30, 2006. 2006 Bonus includes $50,000
retirement bonus.
Following is information with respect to stock options granted to and
exercised by the executive officers named in the Summary Compensation Table
during the fiscal year ended June 30, 2006, together with the number of
options outstanding as of such date. Data, as appropriate, has been adjusted
for stock splits.
Option Grants In Fiscal 2006
The Company did not grant options to any of the executive officers named in
the Summary Compensation Table during the fiscal year ended June 30, 2006.
Aggregated Option Exercises In Fiscal 2006 And June 30, 2006 Option Values
Number of Shares Value of
Shares Underlying Unexercised Unexercised In-the-Money
Acquired On Value Options at 6/30/06 Options at 6/30/06
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
------------------ -------- -------- ----------- ------------- ----------- -------------
John F. Prim 35,000 $ 534,469 350,000 - $1,029,406 -
Tony L. Wormington 60,000 991,268 130,000 - 1,097,550 -
Kevin D. Williams - - 190,000 - 1,902,775 -
Mark S. Forbis 5,000 87,354 50,000 - 199,600 -
Marguerite P.
Butterworth 50,000 341,712 - - - -
Jerry D. Hall - - - - - -
Agreements With Executive Officers
The Company has no employment contracts with any of its executive officers.
In August of 2005, the Company entered into Termination Benefits Agreements
with each of Messrs. Prim, Wormington and Williams, and one other non-
executive officer of the Company. Under each of these Agreements, the
executive will receive two times his base salary if terminated within the
first 12 months after a change in control or one time his base salary if
terminated during the second 12 month period following a change in control.
Change in control is defined as an acquisition of 35% or more of the stock
of the Company, termination of service of a majority of the members of the
Board of Directors during any two year period for reasons other than death,
disability or retirement, approval by the shareholders of liquidation of the
Company or sale of 50% or more of its assets, or approval by the
shareholders of a merger or consolidation if the Company shareholders own
less than 50% of the combined voting power of the resulting corporation.
The termination benefits will be paid upon any termination of the executive
during the two years following any change in control unless the termination
occurs by reason of the executive's death, disability, retirement, or if the
termination is for cause. The Termination Benefits Agreements have terms of
two years, will automatically renew thereafter for two year terms unless
terminated by the Board of Directors, and the Agreements may not be
terminated following any change in control.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information as of June 30, 2006 with respect
to the Company's equity compensation plans under which our Common Stock is
authorized for issuance:
Number of securities
remaining available
for future issuance
under equity
Number of Weighted- compensation
securities to average plans (excluding
be issued upon exercise price securities in
exercise of of outstanding the first column
outstanding options options of this table)
------------------- -------------- --------------------
Equity Compensation
Plans approved by
security holders:
1995 Non-Qualified 664,167 $15.79 0
Stock Option Plan
(Non-employee
Directors)
1996 Stock Option 7,016,226 $15.29 2,578,749
Plan (Employees)
2005 Restricted 0 $0.00 3,000,000
Stock Plan
2005 Non-Qualified 0 $0.00 700,000
Stock Option Plan
(Non-employee Directors)
Equity Compensation 20,000 $16.88 0
Plan not approved
by security holders
(individual option
contract)
COMPENSATION COMMITTEE REPORT
The Company's executive officer compensation program is administered and
reviewed by the Compensation Committee. The Compensation Committee consists
of three independent, non-employee directors of the Company. There was no
insider participation on the Compensation Committee.
Compensation Philosophy
The objectives of our executive officer compensation program are to:
* Focus executives on achieving consistent earnings growth;
* Encourage continuation of JHA's entrepreneurial spirit;
* Attract and retain highly qualified and motivated executives; and
* Encourage esprit de corps and reward outstanding performance.
In meeting the foregoing objectives, the Compensation Committee strives for
the interests of management and stockholders to be the same - the
maximization of stockholder value. The components of the executive
compensation program which are employed by the Committee to meet these goals
include base salary, bonuses, equity compensation and termination benefits
agreements.
Salary
Salaries are established annually by the Compensation Committee at levels to
compensate for the position held and contributions made by each executive.
Recommendations regarding increases in salary are based upon subjective
evaluations of each individual's performance and contribution.
Bonus
The Compensation Committee has recommended and the Board has adopted a bonus
plan for our senior executives. Under the 2007 Executive Bonus Plan, the
Chief Executive Officer, President and Chief Financial Officer will be
eligible for annual cash bonuses of up to 45% of their base salaries if the
Company achieves specific growth in earnings per share during the fiscal
year ending June 30, 2007. Under the plan, bonuses will be paid to an
executive officer following the end of the current fiscal year (July 1,
2006 - June 30, 2007) if earnings per share growth targets are achieved by
the Company. No bonus is payable to any officer under the plan unless
earnings per share growth of at least 14% is achieved. At earnings per
share growth of 14%, a bonus of 7.5% of base salary will be payable. If
earnings per share increase by 15%, then a bonus of 20% of base salary will
be payable. Increases in earnings per share above 15% will be rewarded with
additional bonus, up to a maximum of 45% of base salary if earnings per
share increase 20% or more.
Equity Compensation
For many years, the Company used longer term employee incentives in the form
of stock options. Each of the executive officers continues to hold options
granted in prior years. Because of recent changes in the accounting
treatment of stock options, however, we have determined that future equity
incentives will be in the form of restricted stock. In 2005, the Board
proposed and the stockholders adopted our Restricted Stock Plan, which is
intended to be the primary structure for future equity incentive awards to
the executive officers and all other employees of the Company and its
subsidiaries. We believe that equity awards help focus executive and
employee attention on managing the Company from the perspective of an owner
with an equity stake in the business. The Compensation Committee has the
discretion to grant restricted stock under the Plan to the executive
officers and to determine the terms of the restrictions on granted shares.
No shares were granted under the Restricted Stock Plan during the fiscal
year ending June 30, 2006.
Termination Benefits Agreements
In 2005, the Board authorized the Company to enter into Termination Benefits
Agreements with certain executives. Recognizing that any future threatened
or actual change in control such as an acquisition or merger could cause
disruption and harm to the Company in the event of resulting loss of key
executives, the Termination Benefits Agreements are intended to provide an
incentive to retain the specified executives through the resolution of a
threat or through a change in control. Under the agreements, each of these
executives will receive two times his base salary if terminated within the
first 12 months after a change in control or one time his base salary if
terminated during the second 12 month period following a change in control.
Each of the Termination Benefits Agreements has a term of two years, will
automatically renew thereafter for successive two year terms unless
terminated by the Board of Directors, and may not be terminated following
any change in control. The Agreements specify that they do not confer on
the executives any right to continued employment and shall not interfere
with the right of the Company to terminate the executives at any time.
Summary
In employing the foregoing elements of compensation, the Compensation
Committee considers the experience, prior compensation levels, personal
performance, number and value of previously granted options, and other
subjective factors relating to each individual in combination with objective
Company and individual objectives. We seek to optimize the balance between
base salary, short-term and long-term incentives.
Mr. Prim's Compensation
The base annual salary of Chief Executive Officer Jack Prim was increased
to $468,000 in August of 2006 from the previous base of $450,000 set in
July of 2004. Mr. Prim's compensation for fiscal year 2007 is based upon
available comparative information, subjective evaluation of his performance,
comparison with other management personnel and Company-wide standards.
Specific performance goals were not used in setting his base salary.
Because the corporate net income growth goal of 20% was not achieved during
fiscal year 2006, no bonus was granted to Mr. Prim under the 2006 Executive
Bonus Plan. No discretionary bonus, stock options or other equity awards
were granted to Mr. Prim during our 2006 fiscal year. The Company entered
into a Termination Benefits Agreement with Mr. Prim effective August 30,
2005.
The Compensation Committee, with the approval of the Board of Directors, has
established a bonus plan for Mr. Prim for the current fiscal year under the
Company's 2007 Executive Bonus Plan. Under this plan, Mr. Prim is eligible
to receive a cash bonus of a percentage of his base salary if the Company
achieves growth targets for earnings per share for the fiscal year ending
June 30, 2007. No bonus is payable unless the Company achieves growth in
earnings per share of at least 14% for the year. The bonus increases from
7.5% of base salary at 14% earnings per share growth to 45% of base salary
if earnings per share grow by 20% or more.
Limits on Deductibility
The Compensation Committee notes that there is a $1,000,000 cap on the
income tax deduction which may be taken with respect to any individual
officer's compensation. While current cash compensation paid to our
executive officers is substantially less than the cap, the ultimate value of
outstanding stock options is not now known, and thus the cap may be
important in some future year. The cap has been considered by the Committee
and we intend to take the steps necessary to conform the Company's
compensation structure to comply with the cap if the issue arises in a
future period.
James J. Ellis, Joseph J. Maliekel and Craig R. Curry
Members of the Compensation Committee
COMPANY PERFORMANCE
The following graph presents a comparison for the five-year period ended
June 30, 2006, of the market performance of the Company's common stock with
the S & P 500 Index and an index of peer companies selected by the Company:
The following information depicts a line graph with the following values:
JKHY Peer Group S&P 500
2001 100.00 100.00 100.00
2002 54.13 108.90 82.01
2003 58.32 109.10 82.22
2004 66.41 123.92 97.93
2005 61.04 127.39 104.12
2006 66.20 142.91 113.11
This comparison assumes $100 was invested on July 1, 2001, and assumes
reinvestments of dividends. Total returns are calculated according to
market capitalization of peer group members at the beginning of each period.
Peer companies selected are in the business of providing specialized
computer software, hardware and related services to financial institutions
and other businesses. Companies in the peer group are Bisys Group, Cerner
Corp., Computer Science, Efunds Corp., Euronet Worldwide Inc., Fair Isaac
Corp., Fidelity National Financial, First Data Corp., Fiserv Inc., John H.
Harland Company, Marshall & Ilsley Corp., National Datacomputer Com, Open
Solutions Inc. and SEI Investments Company.
PROPOSAL 2
APPROVAL OF THE COMPANY'S 2006 EMPLOYEE STOCK PURCHASE PLAN
Subject to the approval of the Company's stockholders at the Annual Meeting,
the Board, on the recommendation of the Compensation Committee, has adopted
the Jack Henry & Associates, Inc. 2006 Employee Stock Purchase Plan (the
"Plan"). The Company's existing employee stock purchase plan became
effective on January 1, 1996 and will terminate upon approval of the Plan.
The Plan is intended to qualify as an "employee stock purchase plan" under
Section 423 of the Internal Revenue Code of 1986, as amended (the "Code").
Summary of the Plan
The following summary of the Plan is qualified in its entirety by reference
to the complete text thereof, which is attached to this proxy statement as
Exhibit B.
The purpose of the Plan is to provide employees of the Company with an
opportunity to purchase shares of the Company's Common Stock, thereby
linking the interests of employees and stockholders. One million shares of
the Common Stock are authorized for purchase under the Plan. If the number
of issued shares of the Common Stock increases or decreases due to a stock
split, reverse stock split, stock dividend, combination, reclassification or
any other increase or decrease in the number of shares of the Common Stock
without receipt of consideration by the Company, the number of shares
available for purchase under the Plan, and the price for any shares subject
to outstanding options, shall be proportionately adjusted.
Administration
The Plan is administered by the Board of Directors or a committee appointed
by the Board which consists of members of the Board. The Board or the
committee has full and exclusive discretionary authority to interpret the
provisions of the Plan, determine eligibility and adjudicate disputed claims
under the Plan.
Eligibility
Employees of the Company, including employees of the Company's wholly-owned
subsidiaries and other subsidiaries as designated by the Board (other than
stockholders who, immediately after the grant of any option under the Plan,
would own or have the right to acquire 5% or more of the Company's common
stock), are eligible to participate under the Plan if (i) their customary
employment with the Company is at least twenty hours per week and more than
five months in any calendar year, and (ii) they have been employed by the
Company for at least one year. Employees' eligibility is determined on
the enrollment date for each offering period. The enrollment date is the
first day of the applicable offering period. As of September 1, 2006,
approximately 2,875 employees were eligible to participate in the Plan.
Eligible employees participate in the Plan by filing a subscription
agreement with the Company at least 10 days prior to an enrollment date
authorizing payroll deductions that accumulate during the offering period to
purchase shares of the Company's common stock at a discount.
Offering Periods
Offering periods begin on the first trading day which is on or after the
16th day of each calendar month, and end on the last trading day which is on
or before the 15th day of the following calendar month. A trading day is a
day on which national stock exchanges and the Nasdaq system are open for
trading. The Board of Directors can change the duration of offering periods
for future offerings at least 15 days prior to the scheduled beginning of
the first offering period to be affected.
Payroll Deductions
Payroll deductions for participants begin on the first payday following the
enrollment day. Participants select payroll deduction rates in whole dollar
amounts or whole percentage of compensation, not less than $10 per pay
period, and not greater than 10% of total W-2 compensation during the pay
period. The payroll deduction rate elected by a participant is irrevocable
during the offering period, and remains in effect until changed or
terminated by the participant. Participants may increase, decrease or
discontinue their payroll deductions for subsequent offering periods by
filing a change or withdrawal form with the Company at least 10 business
days prior to an enrollment date.
Purchase Price and Amount of Stock Purchased
When a participant enrolls in the Plan, the participant receives an option
to purchase shares of the Common Stock on the last trading day of the
offering period at 95% of the fair market value of the shares on that day.
The number of shares a participant will be able to purchase will generally
be equal to the payroll deductions during the offering period divided by the
purchase price per share and will include fractional shares (to the fourth
decimal place). The Plan limits each participant's share purchases in order
to stay within the Code's $25,000 per year purchase limitation (based on the
fair market value of the shares on the first day of the offering period).
The fair market value of the common stock for a given date is equal to the
closing sales price (or, if no sales were reported, the closing bid) for the
immediately preceding trading day on The Nasdaq Stock Market, as reported in
The Wall Street Journal or such other source as the Board deems reliable.
Withdrawal
A participant may terminate participation in the Plan as of the first day of
any offering period by filing a change or withdrawal form with the Company.
The participant's payroll deductions will continue through the end of the
offering period in which the form is filed, and those amounts will be
applied to the purchase of shares of the Common Stock in accordance with the
terms of the Plan. As soon as administratively practicable thereafter, the
participant will receive a stock certificate for the number of whole shares,
and a cash payment equal to the fair market value of any fractional share,
credited to the participant under the Plan.
Termination of Employment
In the event of a participant's termination of employment for any reason,
including death, payroll deductions will be taken from the participant's
final paycheck and applied to the purchase of shares of the Common Stock in
accordance with the terms of the Plan. As soon as administratively
practicable thereafter, the participant (or, in the event of the
participant's death, the participant's beneficiary) will receive a stock
certificate for the number of whole shares, and a cash payment equal to the
fair market value of any fractional share, credited to the participant under
the Plan.
Plan Amendments
The Board of Directors may amend or terminate the Plan at any time.
However, amendments to the Plan to increase the number of shares available
for purchase require stockholder approval. Generally no changes affecting
existing purchase rights may be made without the consent of the affected
participants. However, the Board may amend the Plan in the event that the
Board determines that the ongoing operation of the Plan may result in
unfavorable financial accounting consequences.
Certain Federal Income Tax Consequences
Certain federal income tax rules applicable to the Plan under the Code are
summarized below. This summary does not discuss any local, state or foreign
tax laws that may be applicable to any participant.
The amount which a participant contributes to the Plan through payroll
deduction is not deductible by the participant. A participant does not
recognize income at the time an option to purchase shares of stock is
granted or exercised under the Plan. However, a participant may recognize
income upon disposition of those shares.
If a participant disposes of any shares of stock acquired under the Plan in
a disqualifying disposition, in the taxable year of the disposition the
participant will recognize ordinary income equal to the excess of (1) the
fair market value of the shares on the date of purchase (which is the last
trading day during the offering period in which the shares are purchased),
over (2) the purchase price paid by the participant for those shares. Any
difference between the fair market value on the date of purchase and the
proceeds from a sale of the shares will be treated as long-term or short-
term capital gain or loss, as applicable, depending on how long the
participant holds the shares after the date of purchase. A disqualifying
disposition is any sale or other disposition of a share of stock within two
years after the date of grant (which is the first trading day during the
offering period in which the option to purchase the share is granted). In
the taxable year of a disqualifying disposition, the Company may take a
deduction equal to the amount of ordinary income recognized by the
participant.
If a participant disposes of any shares acquired under the Plan more than
two years after the date of purchase, or upon the participant's death at any
time while owning the shares, in the taxable year of the disposition or
death the participant will recognize ordinary income equal to the lesser of
(1) the excess of the fair market value of the shares on the date of
disposition or death over the purchase price paid by the participant for
those shares, or (2) 5% of the fair market value of the shares on the date
of grant. Any additional gain recognized upon disposition of the shares in
excess of the amount treated as ordinary income will be treated as long-term
capital gain. If the purchase price paid by the participant for the shares
exceeds the proceeds from their sale, the participant will not recognize any
ordinary income, and the amount by which the purchase price exceeds the sale
proceeds will be treated as a long-term capital loss.
New Plan Benefits
It is not possible to determine at this time the extent to which, if at all,
the executive officers named in the Summary Compensation Table will elect to
participate in the Plan.
Vote Required
Under Delaware law, the affirmative vote of the holders of a majority of the
shares of the Company's Common Stock present in person or represented by
proxy and entitled to vote at the annual meeting, a quorum being present, is
necessary for the approval of the adoption of the Plan. The aggregate
number of shares for which a vote "FOR," "AGAINST" or "ABSTAIN" is made is
counted for the purpose of determining the minimum number of affirmative
votes required for approval, and the total number of votes cast "FOR"
approval is counted for the purpose of determining whether sufficient votes
are received. An abstention from voting on a matter by a stockholder
present in person or represented by proxy and entitled to vote has the same
legal effect as a vote "AGAINST" the matter.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF THE JACK
HENRY & ASSOCIATES, INC. 2006 EMPLOYEE STOCK PURCHASE PLAN. PROXIES
RECEIVED BY THE BOARD OF DIRECTORS WILL BE VOTED FOR THE APPROVAL OF THE
ADOPTION OF THE PLAN UNLESS STOCKHOLDERS SPECIFY IN THEIR PROXY A VOTE OF
"AGAINST" OR "ABSTAIN".
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP served as the independent registered public accounting
firm for the Company for the year ended June 30, 2006. The Audit Committee
has not selected the independent registered public accounting firm for the
current year, because the selection will not be made until after the Annual
Meeting of Stockholders. Representatives of Deloitte & Touche are expected
to be present at the Annual Meeting with the opportunity to make a statement
if they desire to do so and to be available to respond to appropriate
questions.
Audit And Non-Audit Fees
The following table presents fees for professional audit services rendered
by Deloitte & Touche for the audit of the Company's annual consolidated
financial statements for the fiscal years ended June 30, 2006 and 2005 and
reviews of the financial statements included in the Company's Forms 10-Q for
those fiscal years, the audit of the Company's assessment and effectiveness
of internal control over financial reporting under Section 404 of the
Sarbanes-Oxley Act of 2002, and fees for other services rendered during
those periods.
2006 2005
--------- ---------
Audit Fees $ 520,972 $ 305,500
Audit-Related Fees (1) 917,867 493,692
Tax Fees (2) 197,389 173,134
All Other Fees (3) 11,286 37,000
--------- ---------
Total Fees $1,647,514 $1,009,326
(1) Audit-related fees for 2006 and 2005 included audits of two employee
benefit plans, audits performed in accordance with SAS 70 and review of
other SEC filings. SAS 70 reviews are conducted to evaluate the
effectiveness of operational controls in various regulated business
operations of the Company, including our data processing service
bureaus.
(2) Tax Fees for 2006 and 2005 included review of the Company's federal
and specific state income tax returns, assistance with research and
development credits taken on income tax returns, review of other tax
credits and deductions and review of the Company's health care
program plan documentation and related tax filings.
(3) Other fees for 2006 and 2005 included services provided to review
the Company's internal control documentation relative to Section 404 of
the Sarbanes-Oxley Act of 2002.
In making its decision to continue to retain Deloitte & Touche as the
Company's independent registered public accounting firm for the next fiscal
year, the Audit Committee will consider the above information to ensure that
the provision of non-audit services will not negatively impact the
maintenance of the firm's independence.
The Audit Committee has in its Charter expressed its policy governing the
engagement of the Company's independent registered public accounting firm
for audit and non-audit services. Under the terms of the Charter, the Audit
Committee is required to pre-approve all audit, audit related and non-audit
services performed by the Company's independent registered public accounting
firm. All non-audit services for 2006 were pre-approved by the Audit
Committee.
At the beginning of each fiscal year, the Audit Committee reviews with
management and the independent registered public accounting firm the types
of services that are likely to be required throughout the year. Those
services are comprised of four categories: audit services, audit-related
services, tax services and all other permissible services. The independent
registered public accounting firm provides documentation for each proposed
specific service to be provided. At that time, the Audit Committee pre-
approves a list of specific services that may be provided within each of
these categories, and sets fee limits for each specific service or project.
Management is then authorized to engage the independent registered public
accounting firm to perform the pre-approved services as needed throughout
the year, subject to providing the Audit Committee with regular updates.
The Audit Committee reviews all billings submitted by the independent
registered public accounting firm on a regular basis to ensure that their
services do not exceed pre-defined limits. The Audit Committee or its
Chairman reviews and approves in advance, on a case-by-case basis, all other
projects, services and fees to be performed by or paid to the independent
registered public accounting firm. The Audit Committee also approves in
advance any fees for pre-approved services that exceed the pre-established
limits, as described above.
STOCKHOLDER PROPOSALS
Stockholders who intend to present proposals for inclusion in the proxy
statement and form of proxy for the 2007 Annual Meeting of Stockholders must
submit their proposals to the Company's Secretary on or before June 4, 2007.
A shareholder who wishes to present a proposal at the 2007 Annual Meeting,
but who does not request inclusion in the proxy statement, must submit the
proposal to the Company's Secretary by August 22, 2007.
COST OF SOLICITATION AND PROXIES
Proxy solicitation is being made by mail, although it may also be made by
telephone, telegraph, or in person by officers, directors and employees of
the Company not specifically engaged or compensated for that purpose. The
Company will bear the entire cost of the Annual Meeting, including the cost
of preparing, assembling, printing and mailing the Proxy Statement, the
Proxy and any additional materials furnished to stockholders. Copies of the
solicitation materials will be furnished to brokerage houses, fiduciaries
and custodians for forwarding to the beneficial owners of shares held of
record by them and, upon their request, such persons will be reimbursed for
their reasonable expenses incurred in completing the mailing to such
beneficial owners.
FINANCIAL STATEMENTS
Consolidated financial statements of the Company are contained in the 2006
Annual Report which accompanies this Proxy Statement, and are incorporated
herein by reference.
OTHER MATTERS
The Board of Directors knows of no matters that are expected to be presented
for consideration at the 2006 Annual Meeting which are not described herein.
However, if other matters properly come before the meeting, it is intended
that the persons named in the accompanying Proxy will vote thereon in
accordance with their best judgment.
By Order of the Board of Directors
/s/ Michael E. Henry
--------------------
Michael E. Henry
Chairman of the Board
Monett, Missouri
September 29, 2006
A copy of the Company's Annual Report is included herewith. The Company will
furnish without charge a copy of its Annual Report on Form 10-K as filed
with the Securities and Exchange Commission upon written request directed to
Kevin D. Williams, Chief Financial Officer, Jack Henry & Associates, Inc.,
663 Highway 60, Post Office Box 807, Monett, Missouri, 65708. The Form 10-K
is also available at our investor relations website, www.jackhenry.com/ir/.
Exhibit A
JACK HENRY & ASSOCIATES, INC.
AMENDED AND RESTATED
--------------------
AUDIT COMMITTEE CHARTER
-----------------------
(Revised October 4, 2004)
Organization
The Board of Directors of Jack Henry & Associates, Inc. (the "Company") has
established its Audit Committee. The Audit Committee shall be composed of
at least three (3) members of the Board of Directors who are all independent
of the management of the Company and are free of any relationship that, in
the opinion of the Board of Directors, would interfere with their exercise
of independent judgment as members of the Audit Committee. All members of
the Audit Committee must also qualify as independent under all relevant
rules and regulations of the Securities and Exchange Commission (the "SEC")
and under all relevant NASDAQ listing standards. A member of the Audit
Committee who enters into any transaction or relationship which causes such
member to no longer qualify as independent must immediately notify the other
members of the Committee and the Chairman of the Board and tender
resignation from the Committee.
All members of the Audit Committee must be capable of reading and
understanding the Company's financial statements. In addition, at all times
at least one member of the Committee shall be a "financial expert" under
relevant SEC rules and regulations and NASDAQ listing standards.
Members of the Audit Committee shall be appointed by the Board of Directors
and shall serve at the pleasure of the Board of Directors. Audit Committee
members shall be compensated for attendance at meetings as determined from
time to time by the Board of Directors. The Audit Committee chairman shall
be designated by the full Board of Directors at each annual meeting of the
Board of Directors. The Disclosure Committee may delegate specific tasks to
individual members of the Committee. The duties and responsibilities of a
member of the Audit Committee are in addition to those duties set out for
the Board of Directors.
Statement of Policy
The Audit Committee shall provide assistance to the corporate directors in
fulfilling their responsibility to the shareholders, potential shareholders,
and investment community relating to corporate accounting, reporting
practices of the Company, and the quality and integrity of the financial
reports of the Company. In so doing, it is the responsibility of the Audit
Committee to oversee the independent auditor, and to oversee the Company's
system of financial and disclosure controls and compliance with legal and
regulatory requirements.
Statement of Support
The Board of Directors shall cause the Company to provide appropriate
funding and support, as determined by the Audit Committee, for the operation
of the Audit Committee and for payment of compensation to the independent
auditors and any other advisers, accountants or independent legal counsel
retained by the Audit Committee.
The officers and employees of the Company shall, upon request, meet with the
Audit Committee or any adviser to the Audit Committee.
Responsibilities
1. Provide an open avenue of communication between internal auditors,
internal compliance staff, the independent auditors, internal
financial management, the Disclosure Committee, and the Board of
Directors.
2. Review and update the Audit Committee's charter annually.
3. Retain a registered public accounting firm (the "independent
auditors") to audit the financial statements of the Company and
regulated services, approve all audit and non-audit services,
determine the compensation of the independent auditors, review the
qualifications and quality control procedures of the independent
auditors, oversee their work, review their performance, and
discharge the independent auditors. The Audit Committee shall work
to resolve any disagreements between management of the Company and
the independent auditors. The terms of retention of the independent
auditors shall require that the accounting firm report directly to
the Audit Committee.
4. Review the experience and qualifications of the senior members of
the audit staff of the independent auditors. Confirm and oversee
the independence of the independent auditors as required under
applicable NASDAQ Stock Market, SEC and other regulatory rules,
including consideration of whether the provision of non-audit
services is compatible with independence. The Audit Committee shall
require that the independent auditors annually provide a formal
written statement delineating all relationships between the
independent auditor and the Company, consistent with Independence
Standards Board Standard 1, and the Audit Committee shall actively
engage in a dialog with the independent auditor with respect to any
disclosed relationships or services that may impact the objectivity
and independence of the independent auditor.
5. Inquire of management and the independent auditors at least annually
regarding significant risks or exposures and assess the steps
management has taken to minimize such risks to the Company.
6. Consider, in consultation with the internal financial management and
compliance staff of the Company and the independent auditors, the
audit scope and plan of the independent auditors.
7. Review with internal financial management and the independent
auditors the coordination of audit effort to assure completeness of
coverage, reduction of redundant efforts, and the effective use of
audit resources.
8. Consider with management and the independent auditors the rationale
for employing audit firms other than the principal independent
auditors.
9. Regularly consider and review with the independent auditors and the
internal financial management:
* The adequacy and integrity of the Company's financial reporting
process (both internal and external) and the internal control
structure (including disclosure controls).
* The independent auditor's judgment as to the quality of the
Company's financial reporting principles, significant reporting
issues and judgments made in connection with the preparation of
the financial statements.
* Critical accounting policies and practices of the Company, and
alternatives thereto.
* The effect of alternative GAAP methods on the Company's
financial statements and a description of any transactions as
to which management obtained Statement on Auditing Standards
No. 50 letters.
* Any related significant findings and recommendations of the
independent auditors, including any response of Company's
management thereto.
10. Review with management and the independent accountant at the
completion of the annual financial audit:
X The Company's annual financial statements and related
footnotes.
X The independent accountant's audit of the financial statements
and the report thereon.
11. Obtain from the independent auditors assurance that Section 10A of
the Securities Exchange Act of 1934 has not been implicated.
12. Discuss with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to the
conduct of the audit.
13. Review filings with the SEC and other published documents containing
the Company's financial statements and consider whether the
information contained in these documents is consistent with the
information contained in the financial statements.
14. Prepare the report required by the rules of the Securities and
Exchange Commission to be included in the Company's annual proxy
statement.
15. Review with management and the independent auditors each financial
report, including the "Management's Discussion and Analysis of
Financial Condition and results of Operations" and the results of
the independent accountant's review of the financial statements,
before it is filed with the SEC or other regulators.
16. Review legal and regulatory matters, related accounting initiatives,
and any off-balance sheet structures that may have a material impact
on the financial statements, as well as related Company compliance
policies, and programs, correspondence or reports received from
banking or other regulators which raise material issues regarding
the Company's financial statements or accounting policies. Receive
reports from the Company's Compliance Officer. Review and advise
the Board with respect to insider and affiliated party transactions
and violations of the Company's Code of Conduct.
17. Review selection of and changes to the Company's auditing and
accounting principles and practices as suggested by the independent
accountant, internal auditors or management.
18. Recommend to the Board guidelines for the Company's hiring of
employees or former employees of the independent auditors.
19. Meet at least annually with the independent auditors and management
in separate executive sessions to discuss any matters that the
Committee or these groups believe should be discussed privately with
the Audit Committee, including any disagreements with management,
any restrictions in the scope of activities or access to
information, and any management letter provided by the independent
auditors and management's response.
20. Review and pre-approve the retention and fees of the independent
auditors for any permitted non-audit services.
21. Review and approve all material related party transactions.
22. Report Committee actions to the Board of Directors with such
recommendations as the Committee may deem appropriate.
23. Conduct or authorize investigations into any matters within the
Committee's scope of responsibilities. The Committee shall be
empowered to retain independent counsel, accountants, or other
advisers to assist it in the performance of its duties or the
conduct of any investigation.
24. Meet in person or telephonically at least four times per year or
more frequently as circumstances require.
25. Approve the Company's internal regulatory compliance audit plan,
obtain and review all internal regulatory audit reports and obtain
and review all regulatory review reports prepared by independent
auditors, including all reports prepared pursuant to Statement on
Auditing Standards No. 70. The Audit Committee shall perform all of
the functions and responsibilities set forth in this Charter with
regard to regulatory audits, including but not limited to the
retention, review and discharge of independent auditors, inquiry of
and discussion with management, review of changes in practices,
review of regulatory correspondence and reporting to the Board of
Directors.
26. Establish procedures for the receipt, retention and treatment of
complaints received by the Committee or the Company regarding
accounting, internal accounting controls or auditing matters, and
the confidential, anonymous submission by employees of concerns
regarding questionable accounting or auditing matters.
27. The Committee will perform such other functions as assigned by law,
the Company's charter or bylaws, or the Board of Directors.
Limitation of Role
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements and
disclosures are complete and accurate and are in accordance with generally
accepted accounting principles and applicable laws and regulations. These
are the responsibilities of management and the independent auditor.
Exhibit B
JACK HENRY & ASSOCIATES, INC.
2006 EMPLOYEE STOCK PURCHASE PLAN
---------------------------------
The following constitutes the provisions of the Jack Henry &
Associates, Inc. 2006 Employee Stock Purchase Plan.
1. Purpose. The purpose of the Plan is to provide employees of the
Company and Designated Subsidiaries with an opportunity to purchase Common
Stock through accumulated payroll deductions. It is the intention of the
Company that the Plan qualifies as an "Employee Stock Purchase Plan" under
Section 423 of the Code. The provisions of the Plan, accordingly, shall be
construed so as to extend and limit participation in a manner consistent
with the requirements of that section of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company or
any committee thereof designated by the Board of Directors of the Company in
accordance with Section 14.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "Common Stock" shall mean the common stock of the Company,
$0.01 par value.
(d) "Company" shall mean Jack Henry & Associates, Inc.
(e) "Compensation," unless otherwise determined by the Board,
shall mean all cash compensation reportable on Form W-2, including without
limitation base straight time gross earnings, commissions, payments for
overtime, shift premium, incentive compensation, and bonuses, plus any
amounts contributed by the Participant pursuant to a salary reduction
agreement to a qualified deferred compensation plan described in Section
401(k) of the Code or a cafeteria plan described in Section 125 of the Code
maintained by the Employer, but excluding expense reimbursements, equity-
based compensation, gains realized in connection with the exercise of stock
options or participation in stock option or purchase programs and
contributions by the Employer to a qualified deferred compensation plan.
(f) "Designated Subsidiary" shall mean any wholly-owned Subsidiary
or any other Subsidiary that has been designated by the Board from time to
time in its sole discretion as eligible to participate in the Plan.
(g) "Effective Date" shall mean the date the Plan becomes
effective as described in Section 23.
(h) "Employee" shall mean any person (i) who is an employee of an
Employer within the meaning of Section 3401(c) of the Code, (ii) whose
customary employment with the Employer is at least 20 hours per week and
more than 5 months in any calendar year, and (iii) who, as of the Enrollment
Date, has been employed by the Employer for at least one year. For purposes
of the Plan, the employment relationship shall be treated as continuing
intact while the individual is on sick leave or other leave of absence
approved by the Employer and meeting the requirements of Treasury Regulation
Section 1.421-7(h)(2). Where the period of leave exceeds 90 days and the
individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship shall be deemed to have terminated on
the 91st day of such leave.
(i) "Employer" shall mean the Company or a Designated Subsidiary,
as applicable.
(j) "Enrollment Date" shall mean the first Trading Day of each
Offering Period.
(k) "Exercise Date" shall mean the last Trading Day of each
Offering Period.
(l) "Fair Market Value" shall mean, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without
limitation the Nasdaq National Market or The Nasdaq Small Cap Market of
The Nasdaq Stock Market, its Fair Market Value shall be the closing
sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such exchange or system for the last market
trading day prior to the date of determination, as reported in The Wall
Street Journal or such other source as the Board deems reliable;
(ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, its
Fair Market Value shall be the mean of the closing bid and asked prices
for the Common Stock prior to the date of determination, as reported in
The Wall Street Journal or such other source as the Board deems
reliable; or
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good
faith by the Board.
(m) "Offering Periods" shall mean the periods of approximately one
month beginning on or after the Effective Date during which an option
granted pursuant to the Plan may be exercised as described more fully in
Section 4.
(n) "Participant" shall mean an Employee who participates in the
Plan.
(o) "Plan" shall mean this Jack Henry & Associates, Inc. 2006
Employee Stock Purchase Plan.
(p) "Purchase Price" shall mean 95% of the Fair Market Value of a
share of Common Stock on the Exercise Date, provided, however, that in no
event shall the Purchase Price be less than $0.01 per share, and provided
further that the Purchase Price may be adjusted by the Board pursuant to
Section 20.
(q) "Subsidiary" shall mean any corporation other than the
Company, in an unbroken chain of corporations beginning with the Company if,
at the time of granting an option under the Plan, each of the corporations
other than the last corporation in the unbroken chain owns stock possessing
50% or more of the total combined voting power of all classes of stock in
one of the other corporations in such chain.
(r) "Trading Day" shall mean a day on which national stock
exchanges and the Nasdaq System are open for trading.
3. Eligibility.
(a) Any Employee who shall be employed by an Employer on a given
Enrollment Date for an Offering Period shall be eligible to participate in
the Plan during such Offering Period, subject to the limitations imposed by
Section 423(b) of the Code.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Participant shall be granted an option under the Plan (i) to the extent
that, immediately after the grant, such Participant (or any other person
whose stock would be attributed to such Participant pursuant to Section
424(d) of the Code) would own stock of the Company or any Subsidiary and/or
hold outstanding options to purchase such stock possessing 5% or more of the
total combined voting power or value of all classes of stock of the Company
or any Subsidiary, or (ii) to the extent that his or her rights to purchase
stock under all employee stock purchase plans of the Company and its
Subsidiaries accrue at a rate which exceeds $25,000 of fair market value of
such stock (determined at the time such option is granted) for each calendar
year in which such option is outstanding at any time.
4. Offering Periods. The Plan shall be implemented by consecutive
Offering Periods with a new Offering Period commencing on the first Trading
Day which is on or after the 16th day of each calendar month and ending on
the last Trading Day which is on or before the 15th day of the following
calendar month and continuing thereafter until terminated in accordance with
Section 20. The Board shall have the power to change the duration of
Offering Periods (including the commencement dates thereof) with respect to
future offerings without stockholder approval if such change is announced at
least 15 days prior to the scheduled beginning of the first Offering Period
to be affected thereafter.
5. Participation.
(a) An eligible Employee may become a Participant in the Plan by
completing a Subscription Agreement authorizing payroll deductions in the
form required by the Company and filing it with the Human Resources
Department of the Company at least 10 calendar days prior to the applicable
Enrollment Date or by such other date as the Board may prescribe.
Participation in the Plan shall be voluntary.
(b) An Employee's Subscription Agreement and participation in the
Plan shall become effective on the first Enrollment Date following the
timely filing of his or her Subscription Agreement and, provided the
Participant continues to be an eligible Employee, shall remain effective
until changed or revoked by the Participant by filing a Payroll Deduction
Authorization Change or Withdrawal in the form required by the Company
pursuant to Section 6(d) or 10(a). An Employee who becomes eligible to
participate in the Plan after the commencement of an Offering Period or who
is eligible but declines to participate prior to the commencement of such
Offering Period may not become a participant in the Plan until the
commencement of the next Offering Period.
6. Payroll Deductions.
(a) Payroll deductions for a Participant shall commence on the
first payday following the Enrollment Date and shall continue on each payday
during the Offering Period as to which the Participant's Subscription
Agreement is applicable.
(b) At the time a Participant files his or her Subscription
Agreement, he or she shall elect to have payroll deductions, determined as a
whole dollar amount or a whole percentage of Compensation, made on each
payday during the Offering Period in an amount (i) not less than $10.00 per
pay period, and (ii) not greater than 10% of the Compensation which he or
she receives on each payday during the Offering Period, or such other
minimum or maximum rate as may be determined from time to time by the Board
subject to the provisions of Section 20. Except for the foregoing sentence,
all eligible Employees shall have the same rights and privileges under the
Plan.
(c) All payroll deductions made for a Participant shall be
credited to an individual account established under the Plan for such
Participant. A Participant may not make any additional payments into such
account.
(d) A Participant may increase or decrease the rate of his or her
payroll deductions with respect to a subsequent Offering Period by filing a
Payroll Deduction Authorization Change or Withdrawal Form with the Human
Resources Department of the Company, provided that such form is received at
least 10 business days prior to such Offering Period and the Participant is
an eligible Employee as of the Enrollment Date of such Offering Period. A
Participant may suspend or discontinue his or her participation in the Plan
as provided in Section 10, effective at the time described in Section 10. A
Participant may only file one Payroll Deduction Authorization Change or
Withdrawal Form with respect to any Offering Period.
(e) Notwithstanding the foregoing, to the extent necessary to
comply with Section 423(b)(8) of the Code and Section 3(b) of the Plan, a
Participant's payroll deductions may be terminated at any time during an
Offering Period. Payroll deductions shall recommence at the rate provided
in such Participant's Subscription Agreement or Payroll Deduction
Authorization Change or Withdrawal Form, as applicable, at the beginning of
the first Offering Period which ends in the following calendar year, unless
terminated by the Participant as provided in Section 10.
7. Grant of Option. On the Enrollment Date of each Offering Period,
each Participant participating in the Plan for such Offering Period shall be
granted an option to purchase on the Exercise Date of such Offering Period
(at the applicable Purchase Price) the number of shares of Common Stock
determined by dividing such Participant's payroll deductions accumulated in
the Participant's account as of the Exercise Date by the applicable Purchase
Price; provided that in no event shall a Participant be permitted to
purchase for the calendar year in which the option is outstanding, more than
the number of shares obtained by dividing the "applicable dollar amount" by
the Fair Market Value on the Enrollment Date of a share of Common Stock
(subject to any adjustment pursuant to Section 19), and provided further
that such purchase shall be subject to the limitations set forth in
Sections 3(b) and 13. For this purpose, the "applicable dollar amount" is
$25,000, reduced by the Fair Market Value on the applicable Enrollment Date
of Common Stock previously purchased by the Participant under this Plan
during the calendar year. Exercise of the option shall occur as provided in
Section 8. The option shall expire on the last day of the Offering Period.
8. Exercise of Option.
(a) A Participant's option for the purchase of shares shall be
exercised automatically on the Exercise Date, and the maximum number of full
and fractional (to the fourth decimal place) shares of Common Stock subject
to the option shall be purchased for such Participant at the applicable
Purchase Price with the accumulated payroll deductions in his or her
account. Any other monies left over in a Participant's account after the
Exercise Date shall be retained in the Participant's account for the
subsequent Offering Period. During a Participant's lifetime, a Participant's
options are exercisable only by him or her.
(b) If, on a given Exercise Date, the number of shares of Common
Stock with respect to which options are to be exercised may exceed the
number of shares available for sale under the Plan on such Exercise Date,
the Company shall make a pro rata allocation of the shares of Common Stock
available for purchase on such Exercise Date in as uniform a manner as shall
be practicable among all Participants exercising options to purchase Common
Stock on such Exercise Date on the basis of their payroll deductions for
such Offering Period. The balance of the amount credited to the account of
each Participant which has not been applied to the purchase of shares of
Common Stock shall be paid to such Participant in one lump sum in cash as
soon as reasonably practicable after the Exercise Date, without any interest
thereon.
(c) No option shall be exercised to purchase shares of Common
Stock, and no shares shall be issued by the Company under this Plan, unless
such shares are covered by an effective registration statement under the
Securities Act of 1933, as amended, or by an exemption therefrom.
9. Delivery of Stock. As promptly as practicable after each Exercise
Date on which a purchase of shares occurs, the Company shall arrange for the
issuance and delivery to, or credit to the account of, each Participant, as
appropriate, of the shares purchased upon exercise of his or her option. At
the election of the Company, the issuance and delivery of the shares
purchased upon exercise of a participant's option may be affected by
transfer (electronic or otherwise in the discretion of the Company) of such
shares to a securities account maintained in the Participant's name. Stock
certificates will be issued to the Participant when he or she requests by
filing a Stock Certificate Request in the form required by the Company;
provided, however, that the Company shall not be obligated to issue stock
certificates to Participants in an amount less than 25 shares of Common
Stock, except in cases of the Participant's withdrawal from the Plan or
termination of employment or termination of the Plan by the Company.
10. Withdrawal.
(a) A Participant may terminate his or her participation in the
Plan effective as of the first day of the next Offering Period by filing a
Payroll Deduction Authorization Change or Withdrawal Form with the Human
Resources Department of the Company. In such case, the Participant's
payroll deductions will continue through the end of the Offering Period in
which such form is filed, all amounts deducted from the Participant's
Compensation during such Offering Period will be applied to the purchase of
Common Stock pursuant to the Plan, and following such termination of
participation no further payroll deductions for the purchase of shares of
Common Stock shall be made except pursuant to a new Subscription Agreement
delivered in accordance with Section 5.
(b) Upon a Participant's withdrawal from the Plan, a stock
certificate for the number of whole shares of Common Stock credited to the
Participant's account will be issued by the Company to the Participant, and
any fractional share credited to the Participant's account shall be payable
to the Participant in cash in an amount equal to the Fair Market Value
thereof, as soon as administratively practicable following such withdrawal.
11. Termination of Employment.
(a) Upon a Participant ceasing to be an Employee, for any reason,
the payroll deductions credited to such Participant's account during the
Offering Period and, unless no further payroll deductions would be made
because the Participant (or, in the event of death, the beneficiary under
Section 15) withdraws from the Plan, the payroll deductions to be credited
to such Participant's account from his or her final paycheck but not yet
used to exercise the option shall remain credited or be credited, as
applicable, in the Participant's account and applied toward his or her
option for the purchase of shares as provided herein, provided that the
Participant is an employee of the Employer within the meaning of Section
3401(c) of the Code at all times during the period beginning with the date
of the granting of the option and ending on the day three (3) months before
the Exercise Date. The preceding sentence notwithstanding, a Participant
who receives payment in lieu of notice of termination of employment shall be
treated as continuing to be an Employee for the Participant's customary
number of hours per week of employment during the period in which the
Participant is subject to such payment in lieu of notice.
(b) Upon a Participant ceasing to be an Employee, for any reason,
a stock certificate for the number of whole shares of Common Stock credited
to the Participant's account will be issued by the Company to the
Participant (or, in the case of his or her death, to the person or persons
entitled thereto under Section 15), and any fractional share credited to the
Participant's account shall be payable to the Participant (or, in the case
of his or her death, to the person or persons entitled thereto under Section
15) in cash in an amount equal to the Fair Market Value thereof, as soon as
administratively practicable following such termination of employment.
12. Interest. No interest shall accrue on the payroll deductions of a
Participant in the Plan.
13. Stock.
(a) The Common Stock subject to issuance under the terms of the
Plan shall be authorized but unissued shares, previously issued shares
reacquired and held by the Company, or shares acquired on the public market.
Subject to adjustment upon changes in capitalization of the Company as
provided in Section 19, the maximum number of shares of Common Stock which
shall be made available for sale under the Plan shall be 1,000,000 shares.
(b) The Participant shall have no interest or voting rights in
shares covered by his or her option until such option has been exercised.
(c) Shares to be credited to a Participant's account or delivered
to the Participant under the Plan shall, as specified in the Participant's
Subscription Agreement, be registered in the name of the Participant or in
the name of the Participant and his or her spouse.
(d) All cash dividends on shares of Common Stock credited to a
Participant's account, including a fractional share, on the dividend record
date will be credited on the pay date to the Participant's account. Such
dividends shall be reinvested in shares of Common Stock for the
Participant's account on the next Exercise Date.
14. Administration. The Plan shall be administered by the Board or a
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding,
decision and determination made by the Board or its committee shall, to the
full extent permitted by law, be final and binding upon all parties. All
costs and expenses incurred in connection with the administration of the
Plan shall be paid by the Company. No member of the Board shall be
personally liable for any action, determination or interpretation made in
good faith with respect to the Plan or the options, and all members of the
Board shall be fully protected by the Company with respect to any such
action, determination or interpretation.
15. Designation of Beneficiary.
(a) A Participant may file a written designation of a beneficiary
who is to receive any shares of Common Stock and cash, if any, from the
Participant's account under the Plan in the event of such Participant's
death. If a Participant is married and the designated beneficiary is not
the spouse, spousal consent shall be required for such designation to be
effective.
(b) Such designation of beneficiary may be changed by the
Participant at any time by written notice. In the event of the death of a
Participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such Participant's death, the Company
shall deliver such shares and/or cash to the executor or administrator of
the estate of the Participant, or if no such executor or administrator has
been appointed (to the knowledge of the Company), the Company, in its
discretion and in full satisfaction of its obligations with respect to such
Participant, may deliver such shares and/or cash to the spouse or to any one
or more dependents or relatives of the Participant, or if no spouse,
dependent or relative is known to the Company, then to such other person as
the Company may designate.
16. Transferability. Neither payroll deductions credited to a
Participant's account nor any option or rights with regard to the exercise
of an option may be assigned, transferred, pledged or otherwise disposed of
in any way (other than by will, the laws of descent and distribution or as
provided in Section 15) by the Participant. Any such attempt at assignment,
transfer, pledge or other disposition shall be without effect, except that
the Company may treat such act as an election to withdraw from the Plan in
accordance with Section 10.
17. Use of Funds. All payroll deductions received or held by the
Company under the Plan may be used by the Company for any corporate purpose,
and the Company shall not be obligated to segregate such payroll deductions.
18. Reports. Individual accounts shall be maintained for each
Participant in the Plan. Statements of account shall be given to
Participants at least annually, which statements shall set forth the amounts
of payroll deductions, the Purchase Price, the number of shares purchased
and the remaining cash balance, if any, in the Participant's account.
19. Adjustments upon Changes in Capitalization, Dissolution, Liquidation,
Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action by
the stockholders of the Company, the number of shares of Common Stock
covered by each option under the Plan which has not yet been exercised and
the number of shares of Common Stock which has been authorized for issuance
under the Plan but has not yet been placed under option or which has been
returned to the Plan upon the cancellation of an option, as well as the
price per share of Common Stock covered by each option under the Plan which
has not yet been exercised, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock
resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase
or decrease in the number of shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made
by the Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of shares of
Common Stock subject to an option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period then in
progress shall be shortened by setting a new Exercise Date (the "New
Exercise Date"), and shall terminate immediately prior to the consummation
of such proposed dissolution or liquidation, unless provided otherwise by
the Board (or a committee of the Board). The New Exercise Date shall be
before the date of the Company's proposed dissolution or liquidation. The
Board (or a committee of the Board) shall notify each Participant in
writing, at least 10 business days prior to the New Exercise Date, that the
Exercise Date for the Participant's option has been changed to the New
Exercise Date and that the Participant's option shall be exercised
automatically on the New Exercise Date.
(c) Merger or Asset Sale. In the event of a proposed sale of all
or substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, each outstanding option shall be
assumed or an equivalent option substituted by the successor corporation or
a parent or subsidiary of the successor corporation. In the event that the
successor corporation refuses to assume or substitute for the option, any
Offering Period then in progress shall be shortened by setting a new
Exercise Date (the "New Exercise Date") and any Offering Period then in
progress shall end on the New Exercise Date. The New Exercise Date shall be
before the date of the Company's proposed sale or merger. The Board shall
notify each Participant in writing, at least 10 business days prior to the
New Exercise Date, that the Exercise Date for the Participant's option has
been changed to the New Exercise Date and that the Participant's option
shall be exercised automatically on the New Exercise Date.
20. Amendment or Termination.
(a) The Board may at any time and for any reason terminate or
amend the Plan. Except as provided in Section 19, no such termination can
affect options previously granted, provided that an Offering Period may be
terminated by the Board on any Exercise Date if the Board determines that
the termination of the Offering Period or the Plan is in the best interests
of the Company and its stockholders. Except as provided in Section 19 and
this Section 20, no amendment may make any change in any option theretofore
granted which adversely affects the rights of any Participant without the
prior written consent of such Participant. To the extent necessary to
comply with Section 423 of the Code (or any successor rule or provision or
any other applicable law, regulation or stock exchange rule), the Company
shall obtain stockholder approval in such a manner and to such a degree as
required.
(b) Without stockholder consent and without regard to whether any
Participant rights may be considered to have been "adversely affected," the
Board shall, in its absolute discretion, be entitled to change the Offering
Periods, limit the frequency and/or number of changes in the amount withheld
during an Offering Period, establish the exchange ratio applicable to
amounts withheld in a currency other than U.S. dollars, permit payroll
withholding in excess of the amount designated by a Participant in order to
adjust for delays or mistakes in the Company's processing of properly
completed withholding elections, establish reasonable waiting and adjustment
periods and/or accounting and crediting procedures to ensure that amounts
applied toward the purchase of Common Stock for each Participant properly
correspond with amounts withheld from the Participant's Compensation,
increase or decrease the maximum number of shares of Common Stock a
Participant may purchase, subject to the limits of Section 7, during each
Offering Period, establish and/or modify time frames, forms and procedures
with respect to administration of the Plan, and establish such other
limitations or procedures as the Board (or a committee of the Board)
determines in its sole discretion advisable which are consistent with the
Plan.
(c) In the event the Board determines that the ongoing operation
of the Plan may result in unfavorable financial accounting consequences, the
Board may, in its discretion and, to the extent necessary or desirable,
modify or amend the Plan to reduce or eliminate such accounting consequence
including, but not limited to:
(i) Altering the Purchase Price for any Offering Period
including an Offering Period underway at the time of the change in
Purchase Price;
(ii) Shortening any Offering Period so that Offering
Period ends on a new Exercise Date, including an Offering Period
underway at the time of the action of the Board (or a committee of the
Board); and
(iii) Allocating shares.
Such modifications or amendments shall not require stockholder
approval or the consent of any Plan Participants.
21. Notices. All notices or other communications by a Participant to
the Company or any Employer under or in connection with the Plan shall be
deemed to have been duly given when received in the form specified by the
Company at the location, or by the person, designated by the Company for the
receipt thereof.
22. Conditions Upon Issuance of Shares. Shares shall not be issued
with respect to an option unless the exercise of such option and the
issuance and delivery of such shares pursuant thereto shall comply with this
Plan and all applicable provisions of law, domestic or foreign, including,
without limitation, the Securities Act of 1933, as amended, the Securities
Exchange Act of 1934, as amended, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the shares
may then be listed, and shall be further subject to the approval of counsel
for the Company with respect to such compliance.
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of
any such exercise that the shares are being purchased only for investment
and without any present intention to sell or distribute such shares if, in
the opinion of counsel for the Company, such a representation is required by
any of the aforementioned applicable provisions of law.
23. Term of Plan. The Plan shall become effective upon the first day
of the month following the last to occur of its adoption by the Board and
its approval by the stockholders of the Company. The Plan shall continue in
effect for a term of 10 years unless sooner terminated under Section 20.
24. Shareholder Approval. Notwithstanding anything to the contrary
herein, the effectiveness of the Plan shall be expressly subject to approval
by the Company's stockholders within 12 months before or after the date the
Plan is adopted by the Board by the affirmative vote of the holders of a
majority of the outstanding shares of stock of the Company present or
represented and entitled to vote thereon at a shareholder meeting duly held
or by written consent in accordance with applicable law
25. Equal Rights and Privileges. All Employees will have equal rights
and privileges under the Plan so that the Plan qualifies as an "employee
stock purchase plan" within the meaning of Section 423 of the Code or
applicable Treasury regulations thereunder. Any provision of the Plan that
is inconsistent with Section 423 of the Code or applicable Treasury
regulations will, without further act or amendment by the Company or the
Board, be reformed to comply with the equal rights and privileges
requirement of Section 423 of the Code or applicable Treasury regulations.
26. No Employment Rights. Nothing in the Plan shall be construed to
give any person (including any Employee or Participant) the right to remain
in the employ of the Company, or a Subsidiary or to affect the right of the
Company, or any Subsidiary to terminate the employment of any person
(including any Employee or Participant) at any time, with or without cause.
27. Notice of Disposition of Shares. Each Participant shall give
prompt notice to the Company of any disposition or other transfer of any
shares of Common Stock purchased upon exercise of an option if such
disposition or transfer is made (i) within two years from the Enrollment
Date of the Offering Period in which the shares were purchased or
(ii) within one year after the Exercise Date on which such shares were
purchased. Such notice shall specify the date of such disposition or other
transfer and the amount realized, in cash, other property, assumption of
indebtedness or other consideration, by the Participant in such disposition
or other transfer.
28. Governing Law. To the extent that Federal laws do not otherwise
control, the Plan and all determinations made or actions taken pursuant
hereto shall be governed by the laws of the state of Delaware, without
regard to the conflicts of laws rules thereof.
29. Tax Withholding. If at any time the Company or any Subsidiary is
required, under applicable laws and regulations, to withhold, or to make any
deduction of, any taxes or take any other action in connection with any
exercise of an option granted hereunder or any disposition of shares of
Common Stock issued hereunder, the Participant must make adequate provision
for the Company's or such Subsidiary's federal, state or other tax
withholding obligations which arise from such exercise or disposition. The
Company or such Subsidiary shall have the right to deduct or withhold from
the Participant's compensation the amount necessary for the Company or such
Subsidiary to meet applicable withholding obligations.
The foregoing Plan was approved and adopted by the Board of Directors on
August 25, 2006.
[ PROXY CARD ]
-----------------------------------------
JACK HENRY & ASSOCIATES, INC. V O T E B Y T E L E PHONE
c/o UMB Bank, n.a. -----------------------------------------
P.O. Box 419064 Have your proxy card available when you
Kansas City, MO 64141 call Our Toll-Free number 1-888-693-8683
using a touch-tone phone and follow the
simple instructions to record your vote.
-----------------------------------------
V O T E B Y INTERNET
-----------------------------------------
Have your proxy card available when you
access the website www.cesvote.com and
follow the simple instructions to record
your vote.
-----------------------------------------
V O T E B Y M A I L
-----------------------------------------
Please mark, sign and date your proxy
card and return it in the postage-paid
envelope provided or return it to: Proxy
Tabulator, P.O. Box 535450, Pittsburgh PA
15253.
---------------------- ---------------------- -----------------------
Vote by Telephone Vote by Internet Vote by Mail
Call Toll-Free using a Access the Website and Return your proxy
touch-tone telephone: cast your vote: in the postage-paid
1-888-693-8683 www.cesvote.com envelope provided
---------------------- ---------------------- -----------------------
Vote 24 hours a day, 7 days a week.
If you vote by telephone or over the Internet, do not mail your proxy card.
Telephone and Internet votes must be received by 6:00 a.m. EST on
October 31, 2006 to be included in the final tabulation.
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If voting by mail, this proxy card must be signed and dated below.
Please fold and detach card at perforation before mailing.
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Proxy Jack Henry & Associates, Inc. Proxy
663 Highway 60
P.O. Box 807
Monett, Missouri 65708
This proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints John F. Prim and Kevin D. Williams as Proxies,
each with the power to appoint his or her substitute, and hereby authorizes
them to represent and to vote, as designated below, all the shares of common
stock of Jack Henry & Associates, Inc. held of record by the undersigned on
September 22, 2006, at the annual meeting of shareholders to be held on
October 31, 2006 or any adjournment thereof.
Dated , _________________________________________2006.
______________________________________________________
Signature
______________________________________________________
Signature if held jointly
Please sign exactly as name appears below. When shares
are held by joint tenants, both should sign. When
signing as attorney, executor, administrator, trustee
or guardian, please give full title as such. If a
corporation, please sign in full corporate name by
President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
YOUR VOTE IS IMPORTANT
If you do not vote by telephone or Internet, please sign and date this
proxy card and return it promptly in the enclosed postage-paid envelope, or
otherwise to Proxy Tabulator, P.O. Box 535450, Pittsburgh, PA 15253, so your
shares will be represented at the Annual Meeting. If you vote by telephone
or Internet, it is not necessary to return this proxy card.
Please fold and detach card at perforation before mailing.
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This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder.
If no direction is made, this proxy will be voted FOR Proposal 1 and
Proposal 2.
The Board of Directors Recommends a Vote FOR Proposals 1 and 2.
1. ELECTION OF DIRECTORS:
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to
(except as marked to the contrary below) vote for all nominees listed below
INSTRUCTIONS: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list below.
(1) J. Henry (2) J. Hall (3) M. Henry (4) J. Ellis (5) C. Curry
(6) J. Maliekel (7) W. Brown
2. To approve the Company's 2006 Employee Stock Purchase Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
(PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE)